As noted by IDC in its CDO Scorecard, “The chief digital officer (CDO) is a role that has emerged to accelerate digital transformation initiatives across all industries.” But within many organizations, the CDO role often lacks clear definition and can reside within various functions across the organization. In addition, because the people in this role generally have the mandate to drive change, they tend to come up against “organizational friction,” or resistance to change from both employees and management. This is particularly true regarding CIOs, if they believe this mandate rightfully falls under their purview. As you can imagine, the resulting battle for power and control can hinder digital transformation initiatives.
So it’s logical to ask, “Can CIOs act as the CDOs for organizations today? Or do companies really need a separate CDO who can partner with the business and IT to drive digital transformation?”
Let me share my thoughts on this with you.
Why is a CDO role needed today?
To answer this question, we need to consider more carefully the process of innovation in business settings. IT has always helped transform businesses through strategic deployment of new technologies. But the role of technology has expanded far beyond purely supporting business operations. Technology is also the enabler of data management, reporting, and analytics. These critical tools are increasingly intrinsic to delivering improved customer experiences and creating innovative business models, which are driving new sources of revenue – for example, through digitally enhanced, data-driven products, services, and experiences.
Gartner draws the distinction between two types of innovation, and this distinction can aid our understanding of roles in digital transformation. They refer to bimodal innovation that encompasses:
- “Mode 1” innovation, focused on IT infrastructure efficiency and reliability
- “Mode 2” innovation, focused on increasing business agility, transforming customer-facing processes and customer experiences, and developing new business models
The SAP Digital Transformation Executive Study indicates that successful companies must combine the best of these modes, resulting in what is effectively a “bimodal” approach to driving innovation. Our findings suggest that 72% of digital transformation leaders see a bimodal architecture as key to maintaining their core processes while quickly implementing next-generation technology.
For better or worse, CIOs are traditionally associated with mode 1 – keeping the company running efficiently and effectively, at the lowest cost and least disruption. (No wonder they reigned during the era of deploying ERP systems.) It’s mission-critical, but it’s also the less glamorous side of IT today.
In contrast, CDOs are all about disruption and digital transformation – the “mode 2” initiatives: driving new sources of revenue generation and using data to improve the customer experience. According to the SAP study, mode 2 initiatives fall into the category of “core business goals” for 96% of the Top 100 leaders in digital transformation, compared with 61% of laggards.
In my experience, successfully implementing digital transformation initiatives cuts across traditional corporate boundaries. Both types of innovation are needed.
Investments in new digital platforms (the IT infrastructure part of driving innovation) are foundational to enabling digital transformation initiatives. These digital platforms provide greater reliability, efficiency, and ease of data access, delivering benefits that actually become even more important as companies create data-driven business models and services. In addition, investments in new digital platforms also prevent “islands of innovation” from forming.
Many times, digital transformation goes wrong because it focuses on these small silos of innovation that can’t be scaled to the company as a whole because of incompatibilities with core systems, lack of security, or compliance issues. (The new European General Data Protection Regulation that comes into force in May 2018 is a good example. There are huge fines for noncompliance, and any company that has European customers must take this law into account. Compliant innovation requires a strong “mode 1” approach to governance that has to integrate tightly with the new customer-facing “mode 2” initiatives).
Savvy CIOs understand all of this
The top CIOs have always worked very closely with the business on transformation. So it’s easy to see why they might resent the creation of a new CDO role that deals with the more glamorous aspects of the job – cool customer-facing apps – without necessarily taking into account any of the (very real) infrastructure requirements.
What’s the answer?
The SAP study suggests that there are benefits to having digital transformation projects reside with one C-level owner: either with IT (run by the CIO) or a dedicated digital transformation group (run by the CDO). The CIO and CDO can – and ideally should – be the same person. And our findings also suggest that the best CIOs already have the skills to assume the lead role; as shown in the figure below, CIOs at the top 100 companies are already owning an equal number of transformation projects as CDOs. If your organization must have two people for these roles, then the CIO should be a “chief infrastructure officer” – but with the CDO as the “primary business customer.”
Want to know more? I encourage you to take a look at two IDC resources that shed light on this topic: scorecards for CDOs and CIOs for digital transformation, and review the summary of the SAP Digital Transformation Executive Study.
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